Annual report 2005 - Dexia.com

DexiaMessage from the ChairmenMessagefrom the ChairmenAXEL MILLER,Chief Executive Officer2005 was again a year of excellent achievementfor Dexia. In all areas of activity, the Groupsucceeded in increasing its new business, itsincome and its earnings. Costs remainedunder good control overall, despite the factthat many international developments wereundertaken during the year, and that a numberof closures and divestitures took place, aimedat refocusing the Group on its core businesses.Activity in Public/Project Finance wasparticularly buoyant in 2005, with creditcommitments jumping 25%, and net paroutstanding insured by FSA going up 8%in one year. In an environment of marginsqueeze, net underlying income went up14%, and with a ROEE in excess of 22%, thebusiness line continued to deliver a very highprofitability. Similarly, Personal FinancialServices achieved, this year again, a very goodcommercial performance, with customer assetsgrowing by almost 8%, and loans by morethan 11%. Net underlying income went upabove 13% in the business line, as a result of arobust revenue growth and a well-containedcost progression. In the other businesssegments, results have been equally good:net underlying income was up almost 29%in Investment Management and InsuranceServices, and more than 15% in Treasury andFinancial Markets.All these good underlying performancescombined with a number of one-offs duringthe year to create a very healthy bottom lineincome exceeding EUR 2 billion post tax,11.9% above the very good performance ofthe previous year. Furthermore, given the veryhigh level of share buybacks made in 2005(nearly EUR 600 million), earnings per sharerose by 14.5%, coming after the record +28%of the previous year.Looking back, this performance is veryimpressive, when one remembers that in 1996the combined net income of Dexia Franceand Dexia Belgium was EUR 481 million,whilst their capital resources were quitesubstantial compared to the size of theirbalance sheets, the Group’s Tier 1 ratio thenstanding at above 12%.This success must be recalled not only to praisethe two leaders, François Narmon and PierreRichard who, in their respective roles, ranthe Group until 2005, and to express all duegratitude to the staff who made this happen.This must also be done because it helps uslook into the future of Dexia and to address itsforthcoming challenges.Firstly, Dexia’s success clearly stems from avision: that of creating a global player in publicfinance, diversifying its geographic spread, andenhancing its product offer. This has madeDexia a unique player in the universe of publicfinance, when compared to its various localor global competitors. In less than ten years,Dexia managed to generate one billion eurosof net underlying income in Public/ProjectFinance, and more than half of it originatedoutside the domestic base of France andBelgium. Net income has continued to growdespite fiercer competition; the business bookhas grown to a very substantial level, and theseassets in store grant future revenue streams formany years to come.Secondly, the foundations of the more classicalbanking activities have been reinforcedcommercially, and the business was made8